Pages

Monday, September 29, 2008

I can because the plan bordered on the ridiculous. How could this country’s elected officials vote to hand over hundreds of billions of dollars to people that they have reason not to fully trust? Further the plan still seemed sketchy on the details, with ultimately an unknown cost.

I cannot because the President and others said if this did not pass, it would be financial Armageddon. As I wrote about days ago, the President created a self-fulfilling prophecy.

How bad was the damage? S & P down 8.8% Dow down 6.98% Nasdaq down 9.14%

What now? I wish I had a crystal ball. The bail out while offering a lot of hope that much needed capital will find its way to many financial institutions, was not the be all and end all. There are just so many problem areas and they are all going to take time to work out.

Sunday, September 28, 2008

I can understand why politicians have shown opposition to the current administrations bail-out plan. Simply put, it was insane. They asked for up to $700 billion of taxpayers’ dollars with really no thoughtful explanation of how the money was going to be used or who was going to make sure it was used wisely. That said, some sort of plan is critically necessary if for no other reason than the President said that without it, our financial system would likely fail. The basic reasoning put forth for this plan was that the financial system was clogged up, and the government needed to do something immediately to clear out the pipes to get the money flow moving again. Although the reasoning is sound, the suggested action was not.

What the administration should have done is announced a thoughtful plan of significant magnitude was in the works, outlined the key objectives and possible tactics, pulled in the best bi-partisan thinkers on the topic for substantial and meaningful dialogue, then worked with Congress to get it passed. The confidence that something meaningful would come of it, combined with the uncertainty as to what exactly that was going to be, I think would have been enough to settle the markets for a while. Instead the ridiculous plan and the alarmist remarks and posture has caused impossible to quantify damage to the reputation of the United States overall, and the financial markets in particular. Enough said. What now?

Now they still have to come up with a plan to declog the system of bad loans, but I would like to suggest why pairing that plan with a main street bail out is a really bad idea. First of all they are really two separate issues. If the primary concern right now is to reduce the risk and hopefully prevent the financial markets from experiencing a systematic failure, then that implies a set of actions which equitably support those institutions and processes on which the system depends. A lot of this has already been done. First they took over Fannie Mae and Freddie Mac, the largest owner and guarantor of mortgage backed securities. My hope is that they are putting together a good team to manage them, but since that is ‘old news’ we have not heard anything yet. They also bought AIG, the country’s largest insurance company, and are in the process of thoughtfully dissecting their balance sheet and associated risks. By guaranteeing money market funds they stopped the flee of assets out of them, and by turning the largest investment banks overnight in to bank holding companies, they stopped the money exodus there. Further by expediting the sale of WAMU to JPMorgan, they saved the FDIC. Other such moves are likely and have nothing to do with the ‘bailout’ per se.

This bailout fund could thus be exactly that, a bailout fund. The government should hire the smartest, independent, fixed income and specifically mortgage asset minds they can find and give them a chunk of money to manage with oversight. I could name three people right now that would be right for the job. Just like private players are scrambling to put teams together, raise money, and start buying, so should the government.

This is now a significant human capital challenge and not just a financial capital challenge. Can and will the US government find the best people to help manage the assets that now sit on the US Governments Balance Sheet? Key hires would certainly go a long way to regain my confidence.

So now that we have that problem of a Wall Street problem solved, on the Main Street Issue. I understand and empathize that Americans are suffering great financial hardship. I do not want to see families forced out of their homes because they cannot afford to pay the mortgage. I further understand that the costs associated with foreclosures are likely higher then reducing many people’s outstanding loan balances. Some people are in that situation because they have faced spirally health care costs, others because of lost jobs in the construction industry, others because they took out a mortgage the terms of which they did not understand. The reasons are in the millions and each is unique. According to today’s Wall Street Journal 4 million households are behind on their mortgage payments and facing foreclosure, with an additional 2 million possible this year. The problem is that for every American in that situation, there is many more who found a way to pay their bills. For some they went without many things their neighbors had to avoid debt, others took second jobs in the evenings, some borrowed from family members, still more bought lesser of a house or took out a mortgage with a higher upfront mortgage payment. Again there are millions of reasons why these people are not in financial ruin and each is unique.

Let me complicate this all another step. The majority of all these loans are securitized which means that they are not held by the issuing entity but rather have been packaged and sold to the public markets. What happens in the event the borrower defaults is outlined in the bonds offering memorandum. Primarily institutional investors buy (and sell) these securities knowing, and relying upon, the bond paying off according to those terms. The price at all times should be a function of the buyers and sellers assumptions of the likeliness of payment or lack thereof, of the underlying cash flows. The government altering the terms of the loans somewhat arbitrarily has unknown consequences on the financial system and the players there in that have bought and sold and written derivative transactions on those underlying cash flows. Once again we are talking about the integrity of the financial system here. The Government and all associated regulatory authorities allowed this level of complexity and yes, craziness, in to the system, and know they must, must, thoughtfully not arbitrarily work to undo it.

So there it is, the moral question, who do you help and who do you not? Is it fair for the government to suggest substantial and blanket relief for the homeowners in delinquency situations while offering nothing to those who might have handled the exact same life circumstance with more financial prudence? Is it fair that they change the terms under which financial participants, those same participants that collectively hold trillions of government debt, buy and sell mortgage backed securities? Talk about moral hazard? Again my heart goes out to people in economic hardship, but the message the government would be sending to everyone in this country by some sort of blanket Main Street bailout is just plain ‘Un-American,”

Wednesday, September 24, 2008

"Our Entire Economy is in danger right now." Well, I am relieved President Bush finally gets that the world is not a happy place at the moment but did he really need to set off the alarms so catastrophically? With a straight face and monotone voice he said that inaction will result in a severe recession and a financial markets meltdown. I am not so sure. Last week I would have been more in agreement but this week, believe it or not, I am feeling more optimistic. To me it felt like he was calling out that the house was on fire but the fireman had already arrived.

Don't get me wrong the economy and the financial markets are still in a big mess, but I don't think being in it, or out of it, is contingent on a quick bail out plan. By saying what he said however, he perhaps created a self-fulfilling prophesy. They do need to help alleviate the bad asset problem, but wouldn't the markets respond better to a good solution then a quick solution? Even a quick solution will take a lot of time to implement. It is just so hard to trust someone who has been proven untrustworthy when it comes to knowing what to do in response to this credit "crisis".

There has been some good news in the market place, including Buffet's willingness to make an investment in Goldman Sachs to the tune of $5 billion. Private capital is finding it's way in to financial institutions in need. The forces that be also did a lot of other 'stuff' last week, which although seems extreme, was necessary, and did serve to calm things down a little. What the markets need right now is time to digest and breath. I believe that if this administration did not position this bail out as the be all and end all, it would not be. Now that a lot of smart people have had more than a minute to think about possible solutions, it is time to listen to them. Sadly the speech that President Bush gave tonight offered no opportunity to do that. Congress is likely to pass something tomorrow, because our fear invoking ( note not fearless) leaders told them they have to, but I just hope it is not another big mistake to add to the long list of other ones.

At the start of the year I decided to create this blog because I thought it was going to be a historic one for the financial markets and I wanted to get my voice, and the voice's of people I respect, out there. The first day of my official 'writing career' I sat down with my coach, Deborah Siegel and we wrote – “The Confidence Man”, which was published on the Huffington Post. Reading it now, against the current economic developments, it could not be truer. We followed with “Confidence Man Two”, “What a Difference a Day makes”, “Quickfixonomics” and “A Trillion Dollar Market Few Have Ever Heard of.” (read them on by clicking to the links on the right) All spoke to how the administration did not get the magnitude of what was going on in the financial markets, and offered a few ideas of what to do.Repeatedly they offered assurances that everything was pretty much fine and the economy is just going through a rough patch.

Today, at this very moment, the President, the Fed Chairman and the Treasury Secretary are saying trust them again. This time it is with up to $700 billion of funding to do what they think is necessary to help get us out of this 'mess'.I wonder why the American people, as represented by their elected officials, are saying no. This seems yet another example of the “Quickfixonomics” that is becoming the norm.

If you are going to read anything these days, read the Op’eds written in the FT, the NYT and the Wall Street Journal.Very smart people are saying that what is happening is a disaster for the US dollar, and the faith based system its value is dependent upon.I would have to agree.

Besides ironing out the details of a trillion dollar bail out of bad assets from financial institutions, negotiating on whether homeowner relief needs to be part of the picture, figuring out the consequences of bailing out 3 of the largest financial institutions in our country ( Fannie, Freddie and AIG), ignoring many hedge fund calls asking them how to deal with failed counterparties and DK'd ( don't know ) trades, the Federal Reserve and the Treasury orchestrated the conversion of the two largest ( and now really only ) Investment Banks in to Banks.

What does this mean? For GS that is trading way above book? For MS that is trading below? For the exisiting big banks that will now have to compete with them? For the people working there? It should be stabilizing for the market, I think, but the big picture implications of this are still a big unknown.

These types of transactions using take smart people months and months to work out because of the complexity, but hey, these are different times.

The laundry list of announcements over the past week are offering a life line to holders of financial instruments globally, especially it appears, the ones last night: no more short selling of financial stocks, an RTC type solution to bad assets, and a special fund to support money market funds. Honestly, I have mixed feelings to all this. I am thankful that the markets are not in a free fall, but at what long term cost? Short term thinking is what got us in trouble in the first place. Let’s do what keeps us ‘happy’ at the expense of what makes us good. Maximize profits in the short term rather than build businesses on fundamental good models that provide real and realistic products and services to the general public. Capital markets are no longer free flowing but manipulated by non-market forces.

How do you play by the rules when the rules keep changing? The US is the largest and at one time most respected financial system of the world and now? Granted hedge funds got too big and maybe too powerful, but they did some good as well, and this latest move I am sure caused problems that we cannot imagine. Yes rich people invest in hedge funds, but so do endowments and pension funds. And what about Lehman and Merrill? If the government did this earlier I think they would still be standing. Morgan? Goldman? How many people, people, not just rich people, dumped their stock yesterday in order to protect their savings. Seeing the move today I am sure some are never going to touch a stock again.

This is not a free market any more. The government is telling the world we will do whatever we want, whenever we want, to do what we perceive is in the best interest of the 'public' good.

At the end of the day it will be the lawyers that make all the money. The litigation around what is going on right now will last my lifetime.

No more financial news today.....I am going to drive my daughter to school and take a hip hop class. I could never have imagined what has been going on these past few weeks. Never.

Thursday, September 18, 2008

The equity markets were broadly spared a further lashing today thanks to Secretary Paulson’s announcement of some “RTC Like” solution. This is a GOOD THING, and obvious thing, but sadly it is NOT the Holy Grail, and it is shamefully late. I am totally peeved that they did not do this last week, it would have been equally appropriate then. What the heck are they thinking????? Paulson saying he is ‘considering this type of solution” rallies the markets hundreds of points? Sorry thousands of people at Lehman, Merrill, Morgan, Goldman, and for that matter the hundreds of millions of holders of any kind of financial assets. We all got whipped around like a bunch of 10 year olds on the tilt-a-whirl. It is no wonder I feel like vomiting.

So why did they not do this last week? Perhaps because they viewed this as a last step? A place they did not want to go because they realized how complex this would be? I hope Treasury Secretary Paulson is very careful to say enough to calm the markets but not so much as to scare the daylights out of anyone who knows better.

The worry, big worry, is that they are effectively going to own the whole US fixed income securities market? That is not a good thing let me tell you. They are already the new Fannie and Freddie, the newest and biggest giant hedge fund, “Govifreddiefan.” ( has a ring to it, doesn’t it?) Both those mortgage companies got in to trouble in the first place by borrowing at government rates and investing in securities they did not understand. The next step was to take in AIG – another forced step because they waited too long. That added a trillion dollars of stuff and a 'who knows' amount of leverage, but hey, the government can borrow basically at zero.

Think about that for a moment. The government has lowered their funding cost dramatically by failing to act appropriately, and now they are taking on massive leverage to buy the assets of the companies forced in to failure. Only in America.

My friend at a hedge fund wrote to me and said the following, "Everyone in the financial industry is going to become a government employee." That is a rough day.

I guess the central banks must be reading my blog! Overnight their was coordinated action to inject as much as $180 billion through an extension of swap lines. This is a very, very good thing and helped stave off futher market losses in Europe and Asia. This type of action does not make all the problems go away, but it is like inflating a giant air cushion under the markets. The image that comes to mind is what the firefighters do when they are afraid someone is going to jump off a building. My hope is that it gives the markets, both equity and debt, some breathing space.

Wednesday, September 17, 2008

Here are some random thoughts I have on what happened today in the financial markets.

- Another disastrous day as the markets digested the FED bailout of AIG. They had to do it because they were simply too big to fail. People have asked why not Lehman? Because they believed that the market could take it, and that their balance sheet was such a disaster there was no hope. They had to save powder for AIG.- GS and Morgan Stanley – What a smart man pointed out to me is that GS is still trading above book and the market is taking prices down below that. I have no idea what the right price is for GS or any other financial institution for that matter. We have no idea what balance sheets looks like right now. None. People are telling me that MS has to merge, soon, or else… I cannot believe it but ..- I do not understand why the Fed did not cut yesterday. I think in time that will prove a big mistake. If they go now they are reacting. I think they thought that the bail out of AIG would be enough, and it is not. - This deleveraging is gaining momentum and I am not sure where it stops. We have heard little from and about the hedge funds but I believe it is a complete mess. There are all these trades outstanding of massive size and it is not clear at all who will make good on what. It is that house of cards that BILL GROSS wrote about earlier the year and I wrote about on this blog. Scroll back to read about it.- The lack of availability of credit and capital will have deep ripple effects – banks balance sheets are shrinking, they will not/can not lend, if you cannot get money, you do now grow your business, buy equipment, buy a home …….- Globally stocks are down a lot more then here in the US. Hard to believe but true.- The US balance sheet is a big mess. Not only do we have the age old twin deficit problems, but now we have hundreds and hundreds of billions of new stuff, including AIG's whole credit derivative portfolio added on to trillions of residential mortgage product thanks to the Fannie and Freddie rescue. Do not forget that the discount window is open to bascially anything that the banks or I-Banks have on their books.

- Right now the dollar is held up because of this flight to quality, but are US treasury bonds yielding nothing a safe place to be? Problem is where do you go? My husband would say, as he has been saying for a while, GOLD. There is no safe place right now which is really scary.- Money market funds – some funds broke the buck today due to Lehman exposure and there is a huge flight to quality. You cannot blame people for moving money, but moving money is causing huge problems. The proverbial run on the banks. - Financial institutions that are perceived as ‘safe’ are seeing massive inflows as they should. - The dislocation in credit instruments is just massive. I would have to guess there is massive dislocation between where a companies debt and equity are trading.

To end on a positive note – I am sure that if you buy quality stocks right now, and hold them for the long term you will be happy you did. The market needs capitulation to get back on solid ground but it seems like it is happening quickly, though i am not sure how long the recovery will be.

I would LOVE your comments - please feel free to post them.

I was suppose to be in an Instiutional Investor Conference all day called Women and Wealth - but I had to leave needless to say. More on that to follow .....

Tuesday, September 16, 2008

The FED just announced they were not going to cut rates today which is a surprise given what I was hearing in the marketplace. This does not mean they cannot do it tomorrow, or the next day, or.... or. The positive side of this is that perhaps they believe the markets can handle this decision and they have some good news in thier pocket. A cut would have said "things are really bad and we are going to add liquidity", not cutting does not say the opposite, it just does not send that incremental message. We will see how this is taken by the markets. All eyes still focus on AIG as they really are, too big to fail.

Monday, September 15, 2008

How do you begin to describe what went on today in the financial markets? There was no doubt that it was going to be a tumultuous one and of course it was. Lehman Brothers. First and foremost my heart is broken for the thousands of people who lost their jobs and a substantial part of their savings. Second this should be an example of how you cannot wait to find a solution to your problems in these markets, or the market will take you down. Third I am hearing from hedge fund friends that there is a lot of confusion out there as to how trades with Lehman will settle. All just not good.

On to Merrill. First and foremost John Thain is one of the smartest people I know, and more importantly he is a really good guy. I am sure it was very hard for him to have to sell the firm he so recently joined, but I have no doubt that he got the best deal he could. The fact that the deal was struck way above the closing price on Friday is testament to that. I now get why the deal makes sense, and I did not really understand it last night. Simply put they had no choice. With Lehman gone the market was going to take a run at the next I Bank in line and that would be ML. Cudos to Ken Lewis for not being piggy piggy and buying ML at a higher price then he probably had to. I believe that should help moral a lot. This merger does make business sense.

On to AIG. They are in big do do. I think the market was hoping all day that they would come up with something and the fact that they did not helped the market to close at the lows. The fact that so many of the banks are working hard at a solution says that AIG failing would be a big problem for them. The issue is counterparty risk in the massive derivatives market in which they are huge players. I believe their balance sheet is in the hundreds of billions, if not a trillion... people are going to be asking "where were the regulators?"

On to Goldman Sachs. Goldman did the right thing early on. They recognized there was a problem and they took quick action by pairing down positions and taking their lumps. The challenge there after was to try to keep the junk off their balance sheets when their customers were blowing up around them. As a trader I know that is a very, very hard thing to do. In theory you are there to provide liquidity to your clients, but when you don’t have it on the other side, ( ie no one to sell the stuff to ) what do you do? What I use to do was to either try to miss by a little, or have a serious conversation with the client to say “look you know and we know this is bad, here is the price where we can do it and it has to be kept quiet.” I am sure GS did some of both. I am hearing that there is next to no liquidity in anything right now on the fixed income side and in time this will be very good for whoever is left standing. Longer term the fact that competition has been reduced and spread has returned is a good thing. Further people are saying that GS will not survive without having access to a deposit base, and that might well be true. I think it is more likely that GS finds a way to buy a bank then the opposite. My other bold call is that GS finds the funds, perhaps in partnership with some big PE players, to buy a bank.

On to the FED. I am going to make another bold call that they are going to cut rates tomorrow, maybe even sooner. What choice do they have? By opening up their discount window to more and more types of collateral they are saying that we are going to provide liquidity to the market. Period. I don’t believe they should step in to help AIG directly, but by helping the banks, they are helping AIG. They should not give a hoot about inflation right now and just do whatever it takes to reduce the probability of both a major financial crisis and a depression. They need to inflate asset prices, in particular housing. Think of how many problems would do away if they facilitated a bottom to the housing and commercial mortgage markets. They should also create something like the RTC to take on the bad debt. This is where the Fed is missing the boat I think. Bad assets have to go somewhere to be worked out and the sooner the better.

Last the hedge funds. This is a wild card and because of the lack of transparency it is very hard for anyone to know what their positions are, howthey are marking those positions, what their counterparty risk looks like and thus what they are likely to do. One hedge fund, Long Term Capital, created chaos 10 year ago and now there are over 9000 hedge funds out there operating and many of them are huge. Providing liquidity to the market will of course help this situation.

I think tomorrow is going to be another very volatile day, not to mention over night. With the Asian markets closed today I am sure they are going to open very soft.

Sunday, September 14, 2008

The news in the financial sector is going from very bad to absolutely disastrous. Though it seemed likely last week that Lehman was not going survive, actually seeing the headlines that they are going to declare bankruptcy on Monday morning is breathtaking. Further it seems likely that Merrill Lynch is not going to remain in independent investment bank, and the rumor is that Bank of America is going to buy the am. I have to say I don’t understand that one. It does not make sense to me that B of A is strong enough to take on ML’s balance sheet. The price also does not make sense to me as ML closed at around $17 and yet B of A is buying them at $29? Further, AIG is looking to the Fed to bail them out as they cannot find an investor to give them money at levels that they think make sense for them. How can the FED bail out an insurance company? First Bear Stearns, then open up the discount window, then Fannie and Freddie, sorry to Lehman, but now they are going to help AIG? If that is not enough the pundits are saying tonight that Goldman and Morgan better find buyers, now, or they too will be toast. Business models are crumbling before our eyes.

How is all of this is going to play out in the markets? I think this bodes poorly for equities in general, financials in particular, and the US dollar. The world has to be losing faith in the stability of the US Financial system. Major institutions are basically disappearing overnight and they have huge, complex, balance sheets. As for the US Government's or the FEd's balance sheet? Don't get me started.

The days of massive leverage are over - both at the consumer and the institutional levels. The Investment Banks are waking up to this reality as are all the other financial players that rely on high leverage to make their business work. This is not good for hedge funds, not good.

I started writing this BLOG at the beginning of the year because I thought it was going to be a historic time in the financial markets but if someone would have told me that Bear and Lehman would both be history by the third quarter, I never would have believed them.

Friday, September 12, 2008

Ok here is the problem. Many, many large financial institutions in this country need capital and no one wants to give it to them. Big problem. For Fannie and Freddie only the US Government could do it, but for Lehman and WAMU and AIG and and… anyone can but no one wants to. If they cannot raise capital then they will go under, and thus it is up to the US Government to decide if they pose too great of a risk to the financial system if they fail in which case, as in the case of BEAR, they would step in. It is simply unbelievable how quickly the wheels are coming off the bus.

My best wishes go out to the many people who are innocent bystanders to all this and have had their savings evaporate because of it.

Monday, September 8, 2008

Mohamed El-Erian, CO CEO and CO CIO at Pimco published a thoughtful OPED in the FT today and it is well worth a read. In my piece yesterday I likened what could have occurred to a tsunami, and he choose a hurricane, but we are saying basically the same thing. To be more specific he is calling what is happening a "deleveraging hurricane" and I could not agree more. He also points out that this is the third time we have had such a bold interventionist move occur on a Sunday. Clearly the folks in Washington were very worried about what might have happened on Monday without such action. What he thoughtfully points out is that the government balance sheet will not likely be enough but thier action will need to be supported by other capital inflows. He further calls for a 'holilstic response' from the authorities "including meaningful co-ordination of an often-diffused domestic policy apparatus and explicit, timely, and targeted international support." Good luck with that. All any of us can do is sit tight and pray that Mr. Paulson is bringing in the big brains to help him figure this all out.

Sunday, September 7, 2008

Over the weekend Fannie Mae and Freddie Mac were taken over by the US Government. It was only a matter of months ago when the solution to the growing mortgage problems was to up the loan limits so these two giants could guarantee bigger mortgages. I guess that did not work out. The speed at which this ‘rescue’ happened is testament to just how bad the books must look at these two quasi governmental organizations. With home prices collapsing in many markets, and generally soft almost across the country, I just cannot simply imagine how much money they have effectively lost. I cannot imagine. The reality is they likely have no idea either. Their portfolios are just so large and so complex, that the only possible buyer was in fact, the US Government.

Good Move, and really, it was the only move and the sooner the better. Way too much depends on the perceived credit worthiness of these two entities. Numbers I have recently read have showed that foreigners have been easing up buying their paper, and a broad based dumping of the stuff would have been an absolute disaster. Can anyone spell financial tsunami?

As to the highlights of the plan you can read here for an overview. I have not yet had a chance to pour through all the commentaries as to the details, but I am sure they are few and far between right now. Although I can understand the markets in general reacting positively to this news in the short term, long term I am not so sure. Japanese banks in particular hold a boatload of this paper so I would not be surprised if a plane load of sushi is on it's way to Washington as I type this.

Without a doubt Fannie and Freddie's balance sheets are going to have to shrink, big time. Where are all those lovely bonds going to go? Both of these companies are leveraged big time, bigger I think then even the investment banks, and of course multiples of commercial banks. Oh, and what about the balance sheet of our country? It looks a whole lot different as of right now. First it was open up the discount window and now this. What is next? Will another I-Bank be too big too fail but this time JPM says no? None of this can be good for the dollar over the short to medium term.

So yes, still a good move as yet again another immediate disaster is avoided, but it will come at a cost. A less bloody and nasty cost I think, but still a cost.

As an ex mortgage backed bond trader, I will most certainly be writing a lot more about this in the days and weeks to come. Stay tuned.

Thursday, September 4, 2008

If you only know me through what I write here on my BLOG you might think I am a “glass half empty” type of gal. Every since I started this blog at the beginning of the year I have been going on and on about the credit crisis, the huge problems in many of the country’s largest companies, the poor and perhaps even pathetic actions of the officials that are supposed to be keeping the American economy out of deep, dark trouble….and that is not likely to change any time soon. There will be a time, I hope, when I have good news to report on, but that day is not today. It is just plain nasty out there with few spots to run for cover. My portfolio, like yours, is surely suffering.

The US markets suffered big losses today as even the optimists seem to be throwing in the towel. The most popular argument I read by those arguing that the overall market is a buying opportunity is that the market, overall, is down a lot. I have never understood that argument and I never will. Just because something is down, even a lot, does not mean it is cheap. Yes of course if the fundamentals are there, and better yet have not changed despite a decrease in prices, then yes, that might be a buying opportunity; but, the fundamentals overall have most certainly changed. Housing prices, and thus consumer wealth, has literally fallen off a cliff, and the same time that prices in general, or almost everything, has gone up. Huge companies across multiple sectors are waking up to find their balance sheets a disaster, or their business models fatally flawed, or their costs increasing, or their revenues plunging, or or or….

Even if you think things are not that bad the risk premium has most certainly gone up, which when you discount future cash flows, ( ie price the stock today ), means that all else being equal the stock price should be lower.

Trust me. I want to see the silver lining, I want people to feel secure in their jobs, and not take a big gulp when they fill up their SUV with gas, but I still think it all is going to get worse before it gets better. As I have said many times before on this page the party for the American consumer is over and the hangover is in full swing.

Tuesday, September 2, 2008

September is my New Year. Most of my friends who have kids seem to feel the same way. I like it. After a lot of good intentions for all I was going to get accomplished over the summer months, it is nice to yet again wipe the slate clean. I spent the start of year writing a lot about what was going on in the markets, and I am going to get back to that soon. I also hope to write more about culture, books, music and well... just life. Thanks for reading and please think about sharing this BLOG with your friends... I promise, lots of good stuff is coming.